A Spectral Analysis of Transactions Stock Market Data

B McCullough

The Financial Review, 1995, vol. 30, issue 4, 823-42

Abstract: Several studies have used spectral analysis to analyze stock market data and conclude that the spectrum of price changes is "white noise" or very nearly so. This paper argues that such results are an artifact of improperly analyzing the data. For a random sample of twenty stocks from the NYSE, it is shown that stock price changes are not even approximately white noise, and the spectra of individual stocks vary substantially. Additionally, cross spectral analysis reveals marked differences between the interaction of price changes and volume, and contradicts "stylized facts" from time domain analyses of the price-volume relation. Copyright 1995 by MIT Press.

Date: 1995
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